Tethys Petroleum (TETHF) is engaged in the acquisition, exploration, and development of crude oil and natural gas fields primarily in Kazakhstan, Tajikistan, and Georgia.

Number of shares (March 31, 2014)

299,577,744

Number of options (March 31, 2014)

33,827,400

Number of warrants (March 31, 2014)

2,202,538

Fully diluted number of shares

335,607,682

Share price

$0.33

Market cap

$98.5 million

Enterprise value

$85.9 million

P/S

2.8

P/B

0.5

Tickers

TETHF,TSX:TPL

1.1 History

Tethys was formed on August 12, 2003. The company had its IPO on June 27, 2007. Tethys commenced commercial gas production in December 2007 from its initial production project in the Kyzyloi Field in Kazakhstan.

1.2 Business Model

Tethys' objective is to build a diversified oil and gas exploration and production company with a mixture of oil and gas field development projects and long-term high potential exploration projects focused on the Central Asian and Caspian Region.

1.3 Assets

Tethys has projects in the Republic of Kazakhstan, Republic of Tajikistan and Georgia.

(Source: Tethys)

The company has proved reserves of 14.1 MMboe in Kazakhstan and 10,928 MMboe in global resources.

Oil production declined 37% year-over-year and gas production increased 16% year-over-year during the first quarter. Oil production is currently at approximately 2,750 barrels per day.

4.2 Historical Developments

Here is a table of Tethys’ revenue and earnings since 2007.

Year

2007

2008

2009

2010

2011

2012

2013

Revenue ($ millions)

0.2

5.4

8.6

14.7

30.3

33.6

36.9

Net loss ($ millions)

41.8

22.6

21.7

29.6

27.0

20.9

17.6

EPS

-1.26

-0.40

-0.20

-0.15

-0.10

-0.07

-0.05

Tethys’ revenue has increased 18,350% since 2007, and the negative earnings per share have decreased every year.

5 Shares

Here is a table of Tethys’ number of shares since 2007.

Year

2007

2008

2009

2010

2011

2012

2013

Number of shares (millions)

33.3

56.0

134.6

260.6

286.7

286.7

299.6

Tethys’ number of shares have grown 800% since 2007, but the revenue has grown 18,350%.

6 Outlook

Tethys’ goals in the short term are to:

complete the conditional sale of 50% (plus one share) of the Kazakh assets

carry out the shallow gas exploration and development programme in order to significantly increase natural gas production

secure appropriate funding, as required

fully appraise the Doris and Dione oil field discoveries in the Akkulka Block, Kazakhstan

continue exploration drilling and evaluation of the Akkulka and Kul-Bas licence blocks in Kazakhstan

explore and develop new licences in Georgia

develop the Tajik Bokhtar PSC together with the company’s new partners

7 Risks

The three main risks are negative earnings, country risk, and the oil and gas prices. Tethys’ all assets are located in the former Soviet Union countries, which carry some extra risk. Tethys is also a penny stock.

8 Conclusion

Tethys is currently trading at a P/B ratio of 0.5. I believe the stock could have at least 100% upside potential during the next 12 months.

Disclosure: The author is long TSX:TPL

About the author:

maarnio

I have 15 years of investing experience. I have traded stocks, commodities and Forex markets.

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